Increase Proposed for Mississippi’s “Tobacco Equity Tax”

Pending before the Mississippi Legislature is House Bill 906, which, if enacted, would increase the “tobacco equity tax” applicable to cigarettes manufactured by non-signatories to the State’s 1997 tobacco settlement agreement in Moore ex rel. State v. American Tobacco Co., et al., No. 94-1429 (Miss. Ch. Ct. Jackson Cnty.) (the “tobacco settlement agreement”). On January 11, 2018, the bill was referred to the House Ways and Means Committee, which is chaired by the bill’s principal author, Representative Jeffrey C. Smith (R-Dist. 39).

Mississippi’s “Tobacco Equity Tax”

At present, Mississippi’s “tobacco equity tax” is imposed at a rate of 1.35¢ per cigarette (and adjusted for inflation). Miss. Code Ann. § 27-70-5(1)(a), (b). This is in addition to the 3.4¢ per cigarette (and double that for longer cigarettes) excise tax already imposed. See id. § 27-69-13(a). Exempted from the “tobacco equity tax,” however, are “[t]he cigarettes manufactured by any manufacturer which is a party to the tobacco settlement agreement.” Id. § 27-70-5(1)(d).

The ostensible purposes of the “tobacco equity tax” are to

(a) “Prevent nonsettling manufacturers from undermining this state’s policy of discouraging underage smoking by offering cigarettes at prices that are substantially below the prices of cigarettes of other manufacturers;”

(b) “Protect the tobacco settlement agreement, and funding, which has been reduced because of the growth of sales of nonsettling-manufacturer cigarettes, for programs that are funded wholly or partly by payments to this state under the tobacco settlement agreement and recoup for this state settlement payment revenue lost because of sales of nonsettling-manufacturer cigarettes;”

(c) “Provide funding to enforce and administer this chapter and any legislation relating to nonsettling manufacturers;” and

(d) “Provide funding for any other purpose the Legislature determines.”

Id. § 27-70-1.

The Proposed Increase

If enacted, House Bill 906 would raise the “tobacco equity tax” to a rate of 3.4¢ (and adjusted for inflation), representing a more than 150% increase in the base rate of the “tobacco equity tax.” Obviously, the legislation would substantially increase the disparity in taxation of non-signatories’ cigarettes as opposed to signatories’ cigarettes.

More to Monitor in Mississippi

It remains to be seen how House Bill 906 will fare in the Mississippi Legislature.

And, even if the bill makes it out of committee, it will require the support of supermajorities, as the Mississippi Constitution provides that “[n]o revenue bill, or any bill providing for assessments of property for taxation, shall become a law except by a vote of at least three-fifths of the members of each house present and voting.” Miss. Const. art. 4, § 70.

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